a case note on a decision concerning a prospective lessee
withdrawing from negotiations relating to an agreement to
lease.

Please do not hesitate to contact us if you would like more
information on any topic, whether covered in this newsletter or
not. We hope you find the newsletter informative and useful.

When an expert is not an expert

Background

In the recent case of Dura (Australia) Constructions Pty Ltd
v Hue Boutique Living Pty Ltd (No 3) [2012] VSC 99
(Dura), the Supreme Court of Victoria found that
the majority of the expert evidence led by the plaintiff was
inadmissible. The case involved the construction of an apartment
building with many alleged defects. Both parties appointed twelve
experts to substantiate their claims in court. The experts produced
joint reports and gave evidence at trial. On day 19 of the trial
application objections were raised by both sides as to the
admissibility of the expert evidence.

The decision

To decide whether opinion evidence given by the experts was
admissible, Justice Dixon considered the Evidence Act
2008 and relevant case law, and summarised admissibility into
four rules with relevant questions as follows:

The relevance rule: is the opinion relevant or of
sufficient probative value?

The expertise rule: does the witness have specialised
knowledge?

The expertise basis rule: is the
opinion wholly or substantially based on specialised
knowledge?

The factual basis rules: is the opinion wholly or
substantially based on facts assumed or observed that have been, or
will be, proved? There are three sub rules that also need to be
considered:

(a) The assumption identification
rule: are the facts and assumptions on which the expert's
opinion is founded disclosed?

(b) The proof of assumption
rule: is there evidence admitted or ought to be admitted
capable of proving matters sufficiently similar to the assumptions
made by the expert to render the opinion of value?

(c) The statement of reasoning
rule: is there a statement of reasoning showing how the facts
and assumptions relate to the opinion stated to reveal that the
opinion is based on the expert's specialised knowledge?

By applying the above rules, the court ultimately found that the
majority of the expert evidence of Dura was not admissible.

Comment

The case highlights the importance of thoroughly assessing each
proposed witness and their opinion evidence according to the four
admissibility rules prior to the trial commencing (and/or prior to
any witnesses providing joint evidence). In this instance, the
failure of Dura (Australia) Constructions Pty to make these types
of assessments undermined its defence to a damages claim against
it.

On 13 August 2012 the Commercial Court of the Supreme Court of
Victoria published an amended paper on expert evidence which can be
found at www.commmercialcourt.com.au.
The paper provides an overview of the relevant legislation and
rules governing this area, including an overview of the Dura case.
It is a timely reminder to those who provide expert reports to
familiarise themselves with rules regarding expert evidence, so as
to avoid the risk and embarrassment of challenges to the
admissibility of their reports.

Authored by Rena Solomonidis & Leneen
Forde

Backed up against the wall: business' responsibility for social
media content

Recent cases before the Advertising Standards Board
(ASB) and the Federal Court have confirmed the
accountability of businesses for user-generated content on their
social media sites, such as Facebook and Twitter.

Cases brought against VB Beer[1] and Smirnoff[2] involved
complaints that written and photographic content on the brands'
Facebook pages was in breach of the Australian Association of
National Advertisers Code of Ethics (AANA Code)
and the Alcohol Beverages Advertising Code (ABA
Code).

Notably, the complaints were in relation to posts by the pages'
users in response to questions posted by the brands, such as, 'What
makes a great Australia Day BBQ?' The ASB found that certain
responses were sexist, racist, homophobic, featured irresponsible
drinking and excessive consumption of alcohol, and/or used obscene
language. By allowing such content to remain on the pages, VB
Beer's Facebook page, and its operators, had breached the AANA
Code.

This approach is consistent with the one taken by Greer LJ,
albeit 67 years ago, in a case concerning a misleading noticeboard
posted on the wall of a golf club. In that case, the golf club's
knowledge of the misrepresentative noticeboard, yet its failure to
remove it, amounted to it taking part in the board's
publication.[3]

Similarly, in ACCC v Allergy Pathway Pty Ltd,[4] the
Federal Court held that Allergy's knowledge of, and subsequent
decision not to remove, customer testimonials (which, in light of
previous undertakings given to the court in response to misleading
and deceptive conduct, would have amounted to contempt of court had
Allergy published them itself) from its Facebook and Twitter pages
thereby rendered it the publisher of, and responsible for, that
content.

Social media as advertising

It is important to note that the ASB's findings in the VB Beer
and Smirnoff cases boiled down to whether a business' Facebook page
meets the AANA Code's definition of 'advertising or marketing
communications'. That is, 'any material which is published or
broadcast using any Medium or any activity which is undertaken by,
or on behalf of an advertiser or marketer, and over which the
advertiser or marketer has a reasonable degree of control, and that
draws the attention of the public in a manner calculated to promote
or oppose directly or indirectly a product, service, person,
organisation or line of conduct.'

The ASB held that both content generated by the page creator and
content posted by users on that page constituted 'advertising or
marketing communications', thereby attracting the operation of the
Codes.

Removal of content

Against this backdrop, businesses are now required to monitor
their social media and ensure that infringing material is removed
within a 'reasonable timeframe'. While no definition of what
constitutes a 'reasonable timeframe' is provided by the ASB, the
ACCC has alluded to the factors that a court will consider in
determining 'reasonableness':

size of the business;

extent of the business' investment in a social media
strategy;

the nature of the relevant content.

According to the ACCC, it follows that 24 hours may be
reasonable for a large, well-resourced company.

Legal implications

As demonstrated by the above cases, businesses will be held
responsible for both their social media content and the content of
their users. This means that businesses are at an increased risk of
liability for claims for breach of privacy and intellectual
property infringement, misleading and deceptive conduct, defamation
and breach of relevant Codes.

Practical implications

In order to protect themselves against such claims, businesses
should develop and strictly enforce policies and procedures
relating to the monitoring and maintenance of their social media
sites. This is likely to be on both a technical level (ie using the
existing filtering and moderation functionalities of sites such as
Facebook and Twitter) and a personal level (ie providing staff
training on acceptable terms of social media use).

#Whattotakeawayfromthis

Social media such as Facebook, Twitter and webpages now legally
amount to 'advertising or marketing communications'.

Businesses are responsible for all content on those sites,
whether posted by them or third parties.

Infringing content must be removed within a reasonable timeframe
to avoid liability.

Authored by Ora-Tali Korbl

Butt out! The battle between big tobacco and big government
over plain packaging

The battle between big tobacco and the federal government over
the regulation of tobacco packaging highlights the fact that
intellectual property owners do not have an absolute right to the
use of their trade marks in Australia. The heavily regulated
tobacco industry was dealt another blow with the passing of the
Tobacco Plain Packaging Act 2011 (Cth)
(Act) in late 2011. The High Court has
subsequently confirmed that the Act is constitutionally valid.

As of 1 December 2012, all cigarettes sold in Australia will be
packaged in olive green and without the distinguishing trade marks
and colours that tobacco companies have long used. Instead, the
manufacturer's brand and sub-brand will be displayed in small,
inconspicuous plain font together with a prominent graphic health
warning. In other words, famous and instantly recognisable, but
non-verbal, trade marks such as the Marlboro 'Red Roof' will no
longer be able to be used in Australia.

On 16 August 2012, the High Court issued a short statement
announcing its decision that the Tobacco Plain Packaging Act
2011 (Cth) is constitutionally valid. The unabridged reasons
for the decision are expected to be released later this year. The
crux of the legal challenge brought by the major players in the
first round of litigation was that the legislation involves a
misappropriation and acquisition of their intellectual property
rights contrary to section 51(xxi) of the Australian Constitution.
The plaintiffs, including British American Tobacco, Phillip Morris,
Japan Tobacco International and Imperial Tobacco argued that the
plain packaging requirement would 'effectively extinguish and
render redundant' registered trade marks and give full control of
the cigarette packaging to the Commonwealth.

Proponents of the new law argue that the tobacco industry's
marketing power has been stymied significantly, and will lead to a
further decrease in the number of smokers. However, in the absence
of similar legislation anywhere in the world, the effects are still
speculative. Yet the fact that tobacco giants have vowed to
continue to challenge the legislation suggests they too believe
that plain packaging will minimise the appeal of cigarettes and
therefore impact on their long-term sales and profits. The Act is
currently being challenged via the WTO, with tobacco company
plaintiffs assisted by small tobacco growing nations in arguing
that Australia's legislation violates the Agreement on
Trade-Related Aspects of Intellectual Property Rights
(TRIPS).

It is expected that our move to plain packaging will be followed
by a number of other nations. Furthermore, there is no reason why
similar legislation could not be enacted to regulate, for example,
alcohol and fast food. While the effects of plain packaging on the
habits of young people and other consumers is yet to be fully
understood, it is clear that trade mark owners in other possible
target markets are at risk of losing their valuable intellectual
property rights.

Authored by Remziye Hussein and David Moore

Regulation of litigation funding

Litigation funders form an important part of the landscape in
commercial litigation. In particular, many shareholder class
actions would never have occurred but for the assistance of a
funder, and similarly insolvency practitioners often utilise
litigation funders where there are insufficient funds in the
administration to support the costs of litigation.

The area of litigation funding in Australia has to date been
largely unregulated, which has meant there is little protection for
parties to a funding agreement. This has been changed, at least
partially, by the recent Corporations Amendment Regulation 2012 (No
6), dated 12 July 2012. The Explanatory Statement of the amendment
indicates that it was brought in primarily to specifically exclude
litigation funding arrangements from definition as managed
investment schemes, as a result of the decision by the Federal
Court of Australia in Brookfield Multiplex Limited v
International Litigation Funding Partners Pty Ltd
(2009) 260 ALR 643.

The amendment also seeks to impose a requirement on funders to
have 'adequate arrangements' in place to manage conflicts of
interest, non-compliance with which may result in a fine of up to
50 penalty units. Previously, a funding agreement may have included
a dispute resolution clause providing for an independent senior
counsel to be appointed as an adjudicator in the event of a dispute
(but there was no obligation to include such a clause).

Of particular note is the requirement on funders to 'protect the
interests of members of the scheme'. The extent to which funders
are required to protect those interests is not yet clear, though it
may mean that a funder will be prohibited from controlling a
proceeding or seeking to influence the legal practitioners retained
in proceedings, and limit the ability of a funder to terminate a
funding agreement.

However, it must be stated that the recent amendments do not go
so far as regulating litigation funders for the protection of
plaintiffs (and defendants). There is no requirement on litigation
funders to prove they have sufficient assets to pay costs and
adverse costs orders that they may be obliged to pay, and an over
reliance on the security for costs regime to adequately protect
defendants (which can sometimes fall short). Nor is there any
requirement regarding the corporate make-up of a funder - indeed,
in Australia, any person or any entity (other than lawyers) can
fund litigation.

While there can be little doubt this amendment is a step in the
right direction, without further clarity on the rights and
obligations of parties to a funding agreement, there remains the
potential for abuse by inadequately resourced local funders seeking
to make profit while avoiding the adverse costs if unsuccessful, as
well as overseas funders comfortable in the knowledge that they are
beyond the reach of Australian courts if
unsuccessful.

Litigation funders form an important part of the
landscape in commercial litigation. In particular, many shareholder
class actions would never have occurred but for the assistance of a
funder, and similarly insolvency practitioners often utilise
litigation funders where there are insufficient funds in the
administration to support the costs of
litigation.

The
area of litigation funding in Australia has to date been largely
unregulated, which has meant there is little protection for parties
to a funding agreement. This has been changed, at least partially,
by the recent Corporations Amendment Regulation 2012 (No 6), dated
12 July 2012. The Explanatory Statement of the amendment indicates
that it was brought in primarily to specifically exclude litigation
funding arrangements from definition as managed investment schemes,
as a result of the decision by the Federal Court of Australia in
Brookfield Multiplex
Limited v International Litigation Funding Partners Pty Ltd
(2009) 260 ALR
643.

The
amendment also seeks to impose a requirement on funders to have
'adequate arrangements' in place to manage conflicts of interest,
non-compliance with which may result in a fine of up to 50 penalty
units. Previously, a funding agreement may have included a dispute
resolution clause providing for an independent senior counsel to be
appointed as an adjudicator in the event of a dispute (but there
was no obligation to include such a
clause).

Of
particular note is the requirement on funders to 'protect the
interests of members of the scheme'. The extent to which funders
are required to protect those interests is not yet clear, though it
may mean that a funder will be prohibited from controlling a
proceeding or seeking to influence the legal practitioners retained
in proceedings, and limit the ability of a funder to terminate a
funding
agreement.

However, it must be stated that the recent amendments
do not go so far as regulating litigation funders for the
protection of plaintiffs (and defendants). There is no requirement
on litigation funders to prove they have sufficient assets to pay
costs and adverse costs orders that they may be obliged to pay, and
an over reliance on the security for costs regime to adequately
protect defendants (which can sometimes fall short). Nor is there
any requirement regarding the corporate make-up of a funder -
indeed, in Australia, any person or any entity (other than lawyers)
can fund
litigation.

While there can be little doubt this amendment is a step
in the right direction, without further clarity on the rights and
obligations of parties to a funding agreement, there remains the
potential for abuse by inadequately resourced local funders seeking
to make profit while avoiding the adverse costs if unsuccessful, as
well as overseas funders comfortable in the knowledge that they are
beyond the reach of Australian courts if unsuccessful.

Background

A recent NSW Court of Appeal decision
concerning a prospective lessee withdrawing from negotiations
relating to an agreement to lease is a reminder to parties to
carefully consider at which point during negotiations they wish to
be bound and make this clear from the outset of negotiations. While
it concerns a lease negotiation, this case is applicable to all
forms of commercial negotiation.

Facts

BBB Constructions Pty Ltd
(BBB) owned land approved for development. Aldi
Foods Pty Ltd (Aldi) wrote to BBB, setting out a
lease proposal for Aldi to lease land and a second basement on the
site. The second basement was not originally included in the design
for the development of the site. Importantly, at the end of the
letter were the words 'this offer is subject to Aldi board
approval'.

The parties entered into negotiations
to finalise an agreement to lease. During negotiations BBB
commenced construction and expended money to meet the requirements
of Aldi.

Throughout negotiations, Aldi made
representations to BBB that the lease would be signed. However,
even though execution copies of the lease were provided in May
2007, there were still outstanding issues. In May 2007, BBB began
negotiations for the lease of the site with IGA. These negotiations
ultimately did not result in a lease.

Final documents relating to the lease
were issued in July 2007. Aldi's board did not approve the tenancy
and Aldi informed BBB that they would not be continuing with the
agreement for lease.

BBB commenced action in the Supreme
Court of New South Wales, alleging Aldi had engaged in misleading
and deceptive conduct or had acted unconscionably.

The decisions

The Supreme Court held in favour of
Aldi because BBB knew that the agreement would only be binding once
it was signed by both parties. BBB also knew that the proposal was
subject to Aldi board approval. The Supreme Court also found that
representations made by Aldi were not misleading and deceptive
because BBB did not rely on them.

BBB appealed on the basis that they had
suffered loss as a result of Aldi's representations and that Aldi's
board approval was a mere formality. The Court of Appeal dismissed
the appeal on the basis that Aldi's board approval was a condition
to Aldi entering the lease. The Court of Appeal also held that
BBB's conduct of engaging in negotiations with IGA indicated that
they had not relied on Aldi's representations. The Court of Appeal
held that any expense incurred by BBB in constructing the basement
was to BBB's commercial advantage in any event. However, the Court
of Appeal did note that had Aldi decided not to proceed with the
lease, but had failed to inform BBB, they may have engaged in
unconscionable conduct and been responsible for BBB's costs in
constructing the basement.

Cornwalls' Litigation Team Member Profile

Leneen Forde,
Partner

Leneen's areas of expertise include
contract law, property related disputes, defamation and media, and
education law. Her clients value her direct approach, commercial
advice and her understanding of all aspects of litigation.

As a commercial litigator, Leneen specialises in corporate and
commercial dispute resolution. Her experience includes advising on
contracts, trade practices claims, property, intellectual property
issues, equity matters and defamation. She also advises on breach
of privacy and confidence, and suppression orders.